Copyright levies have existed in national legal systems for almost 50 years since first being introduced in Germany. However, instead of evolving alongside consumption behaviours and new means of distributing copyrighted content, copyright levies have bec [read more]

Copyright levies have existed in national legal systems for almost 50 years since first being introduced in Germany. However, instead of evolving alongside consumption behaviours and new means of distributing copyrighted content, copyright levies have become a burden for consumers, retailers, manufacturers, authors and thereby ultimately for the Digital Single Market as a whole.

A compensation scheme for private copying?

Copyright levies were designed to compensate rights holders for the ‘losses’ incurred by reproductions of works within the terms of the private copying exception recognised in international treaties and in the European Union’s Copyright Directive.

The act of copying was considered detrimental to the economic interests of rights holders, as it would be practically impossible to grant permission to lawful acquirers to carry out such acts for their own non-commercial and domestic use.

As such, the purpose of the system is to provide compensation and not remuneration. Authors are remunerated by way of the licences legally acquired by users according to and conditional on the distribution rights negotiated with their representatives.

Furthermore, the Copyright Directive is ‘device neutral’ concerning the means by which the private copying is carried out. It does not require a device-based levy system. However, European legal provisions do require any compensation scheme for private copying to take into account the application of technologies (‘Technological Protection Measures’ or TPMs) regulating users’ possibility to actually and legally carry out the act of copying.

A case of consumer detriment

From a consumer perspective, copyright levies constitute an unfair and outdated system for compensating rights holders for what amounts to a legitimate use of legally bought content.

Consumers expect to be able to make copies in order to make the content interoperable by way of converting the file to another format or simply transferring the downloaded file between devices. The same applies to back-up copies which consumers make of content carried on their computers and personal servers in order to protect the content against data loss.

However, the consumer concerns around levies extend beyond this and compromise the very functioning of the Single Market. The consumer detriment caused by existing systems of copyright levies can be attributed to three principal sources:

1. Territorial discrimination

National copyright levy systems differ substantially from country to country. In the 22 EU Member States who have adopted such a compensation scheme, there are inconsistences regarding the tariffs, the manner of calculation, the media or equipment affected and the beneficiaries.

For example, the French consumer association UFC-Que Choisirreported that in 2012 French consumers paid 4.8 times more in levies than the European average.

In a Single Market which should benefit all consumers equally, is it not unfair that some must pay more for an act which corresponds to their own legitimate expectations?

More fundamentally, these differences affect the free circulation of goods subject to copyright levies as national laws apply differently with the manufacturer or retailer having to clear these taxes in every Member State wherein the products are marketed before transferring these costs to the consumer.

2. Lack of transparency

In most cases, consumers do not know what copyright levies are, whether they are included in the purchasing price nor what they stand for.

Currently, there is inconsistency among retailers and manufacturers when it comes to informing consumers about copyright levies. Even within the same country and for similar products, there is an asymmetry of information given to consumers when it comes to levies (see picture below). Although the Consumer Rights Directive implemented in 2014 requires that consumers are informed of the “total price of the goods or services inclusive of taxes”, there is no obligation to provide a clear breakdown of the copyright levy rate.

Consumers have an incontrovertible right to know what they are paying for, especially if such a tax embodies the uses which consumers are entitled to make of the content they have legally bought.

3. Double payment

Current European systems of copyright levies apply irrespective of the uses consumers make of devices or blank media. They are sold and levied under the presumption that consumers will make private copies of copyrighted content and that this will cause economic harm to rights holders.

When consumers purchase online content, the cost of making private copies is already included in the purchasing price. This is controlled in different ways, for example by linking access to the content to a specific account or by the application of TPMs enforced in contractual clauses which restrict the consumer’s usage of the content.

Therefore, when consumers buy copyrighted content online they would be also paying for the possibility to exercise the private copying exception although they have already paid for this when purchasing the device. This amounts to a case of double payment by consumers for the very same act of private copying.

Copyright levies are not fit-for-purpose in the digital economy

Technologies themselves are suppressing the need to count on a ‘levy-like’ compensation scheme. The more digital content consumers are able to acquire in the form of licensing agreements, the less need there is for private copy compensation as rights holders would be directly remunerated and compensated at the same time. Therefore, the future of copyright levies must be a phasing-out.

Today and tomorrow’s technology will lead us to a Copernican revolution about the way consumers access and use digital content and so legislation must keep up with such changes while safeguarding the interests of creators and those subsidising the system: consumers.

The way forward – Life after Vitorino’s recommendations

In January 2013, the European Commission published the recommendations resulting from the stakeholder mediation process on private copying and reprography levies, also known as the Vitorino recommendations, in which various sectors were invited to give their views on different issues, including those mentioned above.

This document represents a first step towards thoughtful, considered reform of the current media-based compensation scheme. However, changes must occur at the heart of the European legal instrument legitimising national levies systems: the Copyright Directive.

Although it seems to be difficult to imagine the phasing out of copyright levies in Europe in the short-term, EU decision makers must urgently take legislative measures to balance the interests of the different parties concerned, including consumers.

Therefore, it is necessary to:

a. Establish harmonised criteria to define the harm suffered by rights holders for the act of private copying, whilst maintaining the possibility for Member States to decide alternative compensation mechanisms.

b. Clarify that certain acts of private copying are within the consumer’s legitimate expectations and cause minimal harm to rights holders therefore shall not trigger the application of copyright levies.

c. Make it mandatory to disclose a clear breakdown of the copyright levy rate in the retail price of the product (in those countries which have opted for such compensation schemes).

Like in the worst nightmare of Gregor Samsa, copyright levies have failed to transform themselves into a system which could have actually contributed to the development of the European cultural identity.

If decision-makers do not want copyright levies to become the ‘ungeheuren Ungeziefer’ of EU copyright law, they cannot miss the opportunity to make a real change in the forthcoming reform. After all, even the most unattractive caterpillar can always turn into something beautiful.

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